ABSTRACT
Although poverty in China was mostly confined to the countryside until very recently, there has been an increasing concern about worsening income distribution in cities in the wake of urban reforms in the 1990s (Cook, 2000; the Economist, 2001; Chen and Wang, 2001; Khan and Riskin, 2001). Until the 1980s, China implemented a strong urban-bias development policy through various implicit and explicit transfer programs in pursuit of industrial development strategy (Lin, Cai, and Li, 1996). The rationing system introduced in the 1950s enabled urban residents to have equal access to food and other necessities at much lower prices. Almost all urban residents in the working age group had guaranteed jobs in the state-or collective-owned sectors. Because these jobs were permanent (known as “iron rice bowl”),
urban unemployment was virtually nonexistent. These jobs also provided urban residents with many benefits such as free or subsidized housing, and healthcare (Davis, 1989). As a result, income distribution was much more equal among urban residents than among rural residents. Also because of these welfare arrangements, many people’s livelihoods were wrapped with the fate of state-sector jobs. Not surprisingly, poverty alleviation in urban areas was not on the policy agenda until recently, and China’s anti-poverty program, first initiated in 1986, mainly focused on rural areas.
